捷荣国际控股(02119) - 2024 - 中期财报

Corporate Information This section provides basic corporate information for Jierong International Holdings Limited, including board members, committee structures, company secretary, registered address, principal place of business, auditor, and principal bankers - Executive Directors include Mr. Wong Tat Tong (Chairman), Ms. Fan Yee Man, and Mr. Kam Chun Pong[3] - Chairmen of the Audit, Nomination, and Remuneration Committees are Mr. Tang Kwai Cheung, Mr. Wong Tat Tong, and Mr. Wong Man Fai respectively[7][9][10] - The company's registered public interest entity auditor is Ernst & Young[13] Management Discussion and Analysis Business Review For the six months ended June 30, 2024, the Group's total revenue was HKD 349.4 million, a 2.8% year-on-year decrease, primarily due to reduced revenue from mainland China; however, gross profit margin significantly improved from 32.3% to 35.7% due to lower raw material costs for coffee products 2024 H1 Key Performance Indicators (million HKD) | Indicator | 2024 H1 | 2023 H1 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | 349.4 | 359.4 | -2.8% | | Gross Profit | 124.8 | 116.1 | +7.5% | | Gross Profit Margin | 35.7% | 32.3% | +3.4pp | - The main reason for the revenue decrease was reduced revenue from the mainland China market[16][17] - The improvement in gross profit margin was primarily attributed to lower raw material costs for coffee products[16][17] Business Prospect Facing global economic changes, a persistent downturn in the Hong Kong retail market, and rising restaurant closures, the Group will focus on strengthening cash flow and risk management, including closely monitoring trade receivables recoverability and implementing effective cost-saving measures to sustain business growth - Major challenges include a decline in Hong Kong retail sales (6.6% YoY decrease from Jan-Jun 2024) and an increase in restaurant closures (approximately 2,200 in H1)[21] - To address market complexities, the Group will prioritize robust cash flow and enhanced risk management, particularly monitoring trade receivables, and implementing cost-saving measures[21] Financial Review During the reporting period, the Group's revenue decreased by 2.8% year-on-year to HKD 349.4 million, mainly due to changes in demand for instant products in mainland China; despite the revenue decline, gross profit increased by 7.5% to HKD 124.8 million due to lower raw material costs, raising the gross profit margin to 35.7%; a HKD 12.2 million gain from asset disposal significantly boosted net other income, resulting in a 63.3% surge in profit for the period to HKD 36.1 million and an improved net profit margin from 6.1% to 10.3% Revenue Group revenue decreased by 2.8% from HKD 359.4 million in the prior period to HKD 349.4 million, primarily due to reduced sales volume from mainland China customers' changing demand for instant products Revenue Change (million HKD) | Period | Revenue (million HKD) | | :--- | :--- | | 2024 H1 | 349.4 | | 2023 H1 | 359.4 | | YoY Change | -2.8% | Cost of Sales and Gross Profit Cost of sales decreased by 7.7% year-on-year to HKD 224.6 million, primarily benefiting from lower procurement prices of key raw materials, leading to a 7.5% increase in gross profit to HKD 124.8 million and an improvement in gross profit margin from 32.3% to 35.7% Cost and Gross Profit Change (million HKD) | Indicator | 2024 H1 | 2023 H1 | YoY Change | | :--- | :--- | :--- | :--- | | Cost of Sales | 224.6 | 243.3 | -7.7% | | Gross Profit | 124.8 | 116.1 | +7.5% | | Gross Profit Margin | 35.7% | 32.3% | +3.4pp | Other Income and Expenses Net other income and gains significantly increased by 533.3% to HKD 15.2 million, mainly due to a HKD 12.2 million gain from asset disposal; sales and distribution expenses decreased by 2.3% in line with revenue decline; general and administrative expenses rose by 6.2% due to increased staff costs; and net other expenses increased by 73.7% due to higher exchange losses from RMB depreciation Other Income and Expenses Overview (million HKD) | Item | 2024 H1 | 2023 H1 | YoY Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Net Other Income and Gains | 15.2 | 2.4 | +533.3% | Gain from asset disposal of HKD 12.2 million | | Sales and Distribution Expenses | 49.9 | 51.1 | -2.3% | Reduced marketing and promotion expenses | | General and Administrative Expenses | 40.9 | 38.5 | +6.2% | Increased staff costs | | Net Other Expenses | 3.3 | 1.9 | +73.7% | Increased exchange losses due to RMB depreciation | Profit for The Period As a result of the combined factors, the Group's profit for the period significantly increased by 63.3% from HKD 22.1 million in the prior period to HKD 36.1 million, with the net profit margin improving from 6.1% to 10.3% Profit and Net Profit Margin Change | Indicator | 2024 H1 | 2023 H1 | YoY Change | | :--- | :--- | :--- | :--- | | Profit for the Period (million HKD) | 36.1 | 22.1 | +63.3% | | Net Profit Margin | 10.3% | 6.1% | +4.2pp | Liquidity and Financial Resources The Group maintains a robust financial position with ample resources to support operations; as of June 30, 2024, cash and cash equivalents stood at HKD 197.8 million, total interest-bearing bank borrowings decreased to HKD 4.5 million, and net current assets reduced to HKD 307.7 million due to special dividend payments, while the gearing ratio declined from 1.2% to a very low 0.9%, with no significant investment plans for the coming year Capital and Liquidity Status (million HKD) | Indicator | 2024 June 30 | 2023 Dec 31 | Change | | :--- | :--- | :--- | :--- | | Capital Expenditure (H1) | 13.6 | 16.7 (2023 H1) | -18.6% | | Capital Commitments | 9.0 | 3.9 | +130.8% | | Interest-bearing Bank Borrowings | 4.5 | 7.1 | -36.6% | | Net Current Assets | 307.7 | 391.5 | -21.4% | | Cash and Cash Equivalents | 197.8 | 253.8 | -22.1% | | Gearing Ratio | 0.9% | 1.2% | -0.3pp | - The decrease in net current assets was primarily due to a reduction in cash from special dividend payments[38][41] - The Group has no specific plans for significant investments or capital assets in the coming year[39][42] Risk Management The Group faces foreign currency, interest rate, credit, and liquidity risks, implementing corresponding monitoring measures; foreign currency risk primarily stems from USD purchases and RMB sales, closely monitored with hedging considered when necessary; interest rate risk relates to floating-rate bank borrowings; credit risk is controlled through transactions with reputable parties and credit review procedures; and liquidity risk is managed via a cash pooling system to ensure sufficient funds - Foreign Currency Risk: Primary risk arises from USD purchases and HKD/RMB sales; management closely monitors and considers hedging policies when significant risks arise[48][50] - Interest Rate Risk: Risk is mainly associated with floating-rate bank borrowings; the Group monitors interest rate exposure and considers hedging when needed[48][51] - Credit Risk: The Group transacts only with reputable third parties, employing credit verification procedures and continuous monitoring, resulting in non-significant bad debt risk[49][52] - Liquidity Risk: The Group manages liquidity through an internal cash pooling system, ensuring sufficient funds to meet short-term and long-term needs[53] Human Resources As of June 30, 2024, the Group employed 192 staff in Hong Kong and 193 in mainland China, a slight decrease from the end of 2023; the company's remuneration references market levels and includes a share option scheme to incentivize employees; during the period, the Group provided various training programs covering operational skills and professional knowledge Employee Count Change | Region | 2024 June 30 | 2023 Dec 31 | | :--- | :--- | :--- | | Hong Kong | 192 | 195 | | Mainland China | 193 | 203 | - The Group provides various training, including occupational safety, machine control, management systems, and business knowledge, to ensure effective implementation of business strategies[53] Financial Statements Independent Review Report Ernst & Young reviewed the Group's interim financial information for the six months ended June 30, 2024, in accordance with Hong Kong Standard on Review Engagements 2410, concluding that nothing came to their attention suggesting the interim financial information was not prepared in all material respects according to Hong Kong Accounting Standard 34 "Interim Financial Reporting" - The review was conducted by Ernst & Young, covering the interim financial information for the six months ended June 30, 2024[54][55] - The review concluded that no material matters were found to be non-compliant with Hong Kong Accounting Standard 34[61] Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the company's revenue was HKD 349.4 million, a 2.8% year-on-year decrease; however, due to increased gross profit and a significant gain from asset disposal, profit before tax surged to HKD 45.1 million, with profit for the period reaching HKD 36.1 million, a 63.3% year-on-year increase, and basic earnings per share at HKD 5.02 cents Condensed Consolidated Statement of Profit or Loss Summary (thousand HKD) | Item | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | REVENUE | 349,437 | 359,382 | | Gross profit | 124,808 | 116,106 | | PROFIT BEFORE TAX | 45,124 | 26,548 | | PROFIT FOR THE PERIOD | 36,146 | 22,090 | | Basic earnings per share (HK cents) | 5.02 | 3.06 | Condensed Consolidated Statement of Comprehensive Income Building on the HKD 36.1 million profit for the period, and considering a HKD 3.0 million exchange loss from translating overseas operations, total comprehensive income for the six months ended June 30, 2024, was HKD 33.1 million, a significant increase from HKD 17.8 million in the prior period Condensed Consolidated Statement of Comprehensive Income Summary (thousand HKD) | Item | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | PROFIT FOR THE PERIOD | 36,146 | 22,090 | | OTHER COMPREHENSIVE LOSS | (3,025) | (4,253) | | TOTAL COMPREHENSIVE INCOME | 33,121 | 17,837 | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were HKD 678.2 million, total liabilities HKD 170.6 million, and net assets HKD 507.6 million; compared to the end of 2023, net current assets decreased due to cash reduction from special dividend payments, leading to a decline in total equity from HKD 590.4 million to HKD 507.6 million Condensed Consolidated Statement of Financial Position Summary (thousand HKD) | Item | 2024 June 30 | 2023 Dec 31 | | :--- | :--- | :--- | | Total non-current assets | 229,133 | 217,654 | | Total current assets | 449,101 | 517,463 | | Total current liabilities | 141,373 | 125,926 | | Net current assets | 307,728 | 391,537 | | Net assets | 507,591 | 590,436 | | Total equity | 507,591 | 590,436 | Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, the Group's total equity decreased from HKD 590.4 million at the beginning of the period to HKD 507.6 million, primarily due to dividend payments totaling HKD 116 million, which exceeded the HKD 33.1 million total comprehensive income recorded during the period Equity Movement Summary (thousand HKD) | Item | Amount | | :--- | :--- | | Equity at beginning of period (2024 Jan 1) | 590,436 | | Total comprehensive income for the period | 33,121 | | Dividends paid | (115,966) | | Equity at end of period (2024 June 30) | 507,591 | Condensed Consolidated Statement of Cash Flows In H1 2024, net cash generated from operating activities was HKD 63.8 million; investing activities shifted from a net outflow to a net inflow of HKD 6.2 million, mainly due to proceeds from asset disposal; financing activities saw a significant net outflow of HKD 125.3 million, primarily due to HKD 116 million in dividend payments; ultimately, cash and cash equivalents decreased by HKD 55.3 million Cash Flow Statement Summary (thousand HKD) | Item | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Net cash generated from operating activities | 63,845 | 85,559 | | Net cash generated from/(used in) investing activities | 6,223 | (22,477) | | Net cash used in financing activities | (125,345) | (25,497) | | Net (decrease)/increase in cash and cash equivalents | (55,277) | 37,585 | | Cash and cash equivalents at beginning of period | 253,752 | 189,789 | | Cash and cash equivalents at end of period | 197,781 | 225,875 | Notes to the Condensed Consolidated Financial Statements 3. OPERATING SEGMENT INFORMATION Starting from 2024, due to a decreased proportion of the food segment, the Group revised its operating segments, no longer presenting them separately but evaluating performance and allocating resources for the entire Group as a whole; geographically, Hong Kong remains the primary revenue source, accounting for approximately 70% of total revenue, but its growth has slowed, while mainland China revenue has declined - Starting from 2024, the Group changed its internal reporting structure, consolidating the former “Catering Planning Services” and “Food” segments, and no longer presenting operating segment information[99][100] Revenue from External Customers by Geographical Location (thousand HKD) | Region | 2024 H1 | 2023 H1 | YoY Change | | :--- | :--- | :--- | :--- | | Hong Kong | 244,279 | 238,586 | +2.4% | | Mainland China | 99,187 | 113,940 | -13.0% | | Others | 5,971 | 6,856 | -12.9% | | Total | 349,437 | 359,382 | -2.8% | 4. REVENUE AND OTHER INCOME AND GAINS, NET The Group's total revenue primarily derives from the sale of coffee, tea, and related ancillary products, accounting for 95.7% of total revenue; net other income and gains amounted to HKD 15.2 million, with the vast majority (HKD 12.3 million) stemming from gains on disposal of assets classified as held for sale and items of property, plant, and equipment Revenue Analysis by Goods or Service Category (thousand HKD) | Category | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Sale of coffee, tea and other related ancillary products | 334,534 | 342,514 | | Sale of frozen food | 4,103 | 6,492 | | Revenue from provision of coffee machine and tea machine planning services | 10,800 | 10,376 | | Total | 349,437 | 359,382 | - The largest component of net other income and gains was the gain on disposal of assets and property, plant and equipment items, totaling HKD 12,273 thousand[123] 8. DIVIDENDS During the reporting period, the company recognized and paid a final dividend of HKD 2.22 cents per share and a special dividend of HKD 13.87 cents per share for 2023, totaling HKD 116 million in dividends; additionally, the Board declared an interim dividend of HKD 2.76 cents per share for the six months ended June 30, 2024, an increase from HKD 1.84 cents per share in the prior period Dividend Distribution (thousand HKD) | Dividend Type | 2024 H1 Recognized Distribution | 2023 H1 Recognized Distribution | | :--- | :--- | :--- | | 2022 Final Dividend | — | 15,784 | | 2023 Final Dividend | 16,000 | — | | Special Dividend | 99,966 | — | | Total | 115,966 | 15,784 | - The Board declared a 2024 interim dividend of HKD 2.76 cents per ordinary share, totaling approximately HKD 19,892 thousand, representing a 50% increase from HKD 1.84 cents per share in the prior period[139] 12. TRADE RECEIVABLES As of June 30, 2024, the Group's net trade receivables were HKD 95.0 million, a decrease from HKD 115.2 million at the end of 2023; aging analysis shows that the vast majority (approximately 87%) of receivables are within 30 days, indicating good collection performance, with credit terms generally ranging from 30 to 120 days Trade Receivables Aging Analysis (after impairment allowance, thousand HKD) | Aging | 2024 June 30 | 2023 Dec 31 | | :--- | :--- | :--- | | Within 30 days | 82,776 | 100,546 | | 31 to 60 days | 5,396 | 7,614 | | 61 to 90 days | 4,669 | 4,844 | | Over 91 days | 2,179 | 2,165 | | Total | 95,020 | 115,169 | 17. CONTINGENT LIABILITIES The Group has two warehouses in mainland China lacking necessary construction permits and completion reports, thus unable to obtain property ownership certificates, potentially facing demolition orders and fines up to RMB 1.3 million (approximately HKD 1.4 million); however, the Board, after legal consultation, believes the likelihood of penalties is low and demolition costs are not material, hence no provision has been made - The Group faces a risk of demolition orders and fines up to RMB 1.3 million (approximately HKD 1.4 million) for two warehouses in mainland China due to incomplete documentation[162][163] - Management assessed that the likelihood of penalties being imposed by relevant authorities is low, and potential costs would not be material to the Group, thus no provision was made[162][163] 19. RELATED PARTY TRANSACTIONS During the period, the Group engaged in various transactions with companies controlled by its major shareholders, including procurement of goods, payment for logistics and warehousing services, and provision of OEM processing services; the report also disclosed the total remuneration for key management personnel, including directors Major Related Party Transactions (thousand HKD) | Transaction Content | Related Party | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | :--- | | Purchase of goods | Supply chain service provider | 9,960 | 2,829 | | Purchase of goods | Distributor | 1,038 | 762 | | Logistics and warehousing costs | Warehousing and logistics service provider | 667 | — | | OEM processing income | Coffee and tea producer | 662 | — | Key Management Personnel Remuneration (thousand HKD) | Item | 2024 H1 | 2023 H1 | | :--- | :--- | :--- | | Short-term employee benefits | 7,803 | 8,323 | | Pension scheme contributions | 455 | 435 | | Total | 8,258 | 8,758 | Other Information INTERIM DIVIDEND AND CLOSURE OF REGISTER OF MEMBERS The Board declared an interim dividend of HKD 2.76 cents per share for the six months ended June 30, 2024, a significant increase from HKD 1.84 cents per share in the prior period; the dividend will be paid on September 13, 2024, to shareholders registered on August 30, 2024 - An interim dividend of HKD 2.76 cents per share for 2024 was declared[178] - The record date for entitlement is August 30, 2024, with the dividend payment date on September 13, 2024[178][179] DIRECTORS' INTERESTS AND SUBSTANTIAL SHAREHOLDERS' INTERESTS As of June 30, 2024, Mr. Wong Tat Tong, the company's Chairman, is deemed to hold 71.41% of the company's shares through his controlled corporations and acting-in-concert agreements, making him the controlling shareholder; other substantial shareholders, including Dah Chong Hong Food and CITIC Pacific Limited, are also deemed to hold the same proportion of shares due to acting-in-concert agreements - Executive Director and Chairman Mr. Wong Tat Tong is deemed to hold 514,667,312 shares, representing 71.41% of the company's issued share capital[191][192] Substantial Shareholders' Interests (as at June 30, 2024) | Shareholder Name | Nature of Interest | Number of Shares Held (Long Position) | Percentage of Total Share Capital | | :--- | :--- | :--- | :--- | | Hero Asia Company Limited | Beneficial owner; acting in concert | 514,667,312 | 71.41% | | Dah Chong Hong Food International Holdings Limited | Beneficial owner; acting in concert | 514,667,312 | 71.41% | | CITIC Pacific Limited | Interest in controlled corporation; acting in concert | 514,667,312 | 71.41% | | CITIC Group Corporation Limited | Interest in controlled corporation; acting in concert | 514,667,312 | 71.41% | CORPORATE GOVERNANCE PRACTICES The company complied with most provisions of the Corporate Governance Code during the reporting period, with one deviation: the roles of Chairman and Chief Executive Officer are combined and held by Mr. Wong Tat Tong; the Board believes this arrangement, given Mr. Wong's long-standing responsibility for overall Group management since 1978, facilitates business strategy execution and maximizes operational efficiency, while the independent non-executive directors provide sufficient checks and balances - The company deviated from Corporate Governance Code provision C.2.1, where the roles of Chairman and Chief Executive Officer are combined and held by the same person, Mr. Wong Tat Tong[217][219] - The Board believes this arrangement facilitates business strategy execution and enhances operational efficiency, and the current Board structure ensures a balance of power and safeguards shareholders' interests[219][220]